Yield Aggregation / Vaults

Users deposit their crypto assets into a DeFi vault, which then utilizes smart contracts to distribute these assets across different yield farming strategies. The vault aims to maximize returns.


Vaults in DeFi offer an automated, medium-risk investment strategy, ideal for those seeking a balance between passive and active involvement in yield farming. Operating through smart contracts, these vaults diversify across various strategies, requiring less user engagement compared to liquidity pools while providing a broader range of opportunities than liquid staking. With potential annual returns ranging from 5% to 25%, vaults cater to investors looking for moderate to high yields without the need for extensive DeFi expertise or active management.

Risk and Reward Profile

  • Risk Level: Medium

  • Potential Returns: Moderate, varying with the success of the chosen farming strategies and market conditions.

  • Potential Risks: Includes smart contract risks, changes in protocols, and market volatility.

How It Works

  1. Investors choose a platform like Yearn.Finance, Harvest, Idle, or Beefy and deposit their crypto assets into a vault.

  2. The vault’s smart-contract automatically allocates these assets across various yield farming strategies.

  3. The vault manages operational aspects like gas fees and strategy adjustments, optimizing for the best possible returns.

  4. Investors receive a share of the profits generated by the vault, proportional to their contribution.


How do vaults manage to optimize returns?

Vaults use complex algorithms and smart contracts to analyze and adjust strategies, aiming for the best yield with given market conditions.

Are there withdrawal fees or penalties?

This varies by platform; some might have withdrawal fees or lock-up periods, which should be considered before investing.

What is the difference between yield farming and yield aggregators?

Yield farming involves actively participating in DeFi strategies, such as staking or providing liquidity, to earn returns. It requires direct involvement in choosing and managing these strategies. In contrast, yield aggregators are automated platforms that pool investors' funds and allocate them across various yield farming opportunities. Yield aggregators simplify the process, requiring less active management from the investor and often providing a diversified investment approach.

What are crypto vaults?

Crypto vaults are a type of yield aggregator found in the DeFi ecosystem. They are automated systems that pool investors' crypto assets and use them in various yield farming strategies. These vaults handle the complexities of yield farming, such as strategy optimization and managing transaction fees, making it easier for investors to participate in DeFi without needing extensive knowledge or time to manage their investments. The main goal of crypto vaults is to maximize returns while mitigating risks through diversified strategies.

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